NET PHONES START RINGING UP CUSTOMERS; Big rollouts by cable operators have the Baby Bells scrambling to fight back

On Dec. 8, cable giant Time Warner Inc. announced that it will team up with long-distance providers MCI and Sprint to roll out Internet-based phone service for its 11 million cable-TV customers by the end of 2004. Three days later, AT&T weighed in, saying it will also offer Internet-based phone service in as many as 100 of its markets. The upheaval wrought by the race of both cable companies and telcos to harness the Internet for digital voice communications promises to be monumental. Battle lines are emerging. On the defensive are the Baby Bells, which have long enjoyed dominance in the lucrative local phone service. Rising up to snatch a piece of their prized core market are cable companies and, now, AT&T. All this is good news for VOIP gear makers, such as Cisco and a host of small startups, that sell Net-style equipment.